Top Fund Manager On "Colossally Artificial" Markets

In a couple of rare interviews, top stock-picker Joel Tillinghast recently said that he thinks markets have gotten “colossally artificial”, and that he’s finding more value opportunities overseas than in the US.

“I think it’s colossally artificial, but I don’t see it ending,” Tillinghast, who heads Fidelity’s Low-Priced Stock Fund, said in discussing what has happened to financial markets, Reuters reports. He cited massive central bank intervention that has, in some countries, pushed government bonds into negative-yield territory. And he said ride-sharing service Uber, which has been valued around $40 billion, is another example of out-of-whack markets. “So this high-tech taxi service is selling for three times the price of all the medallions in New York City,” he said. “Subjectively, I think that’s a bubble, even if it is a fantastic service.”

Tillinghast focuses on mid-cap stocks that typically cost less than $35 a share, according to Reuters, which adds that his fund’s annual turnover rate is only about 11 percent.

Along with Salim Hart, Tillingham also manages Fidelity’s Global Intrinsic Value Class fund, which, according to the Financial Post, is focused on finding high-quality companies that have normal, sustainable earnings with an earnings yield of at least 8% — that is, a price/earnings ratio of no greater than 12.5. “I will go [higher than 12.5], but it’s for higher-certainty companies,” Tillinghast told the Post. “Ultimately, I’m striving to fill my portfolio with companies that can give us an eight-percent return.”

Right now, Tillinghast says, he’s finding value in small-caps in Japan, Korea, and other Asian countries. He said Europe is also offering some nice opportunities. “It’s really important to look globally,” he said. “The U.S. is the most successful economy in the world, but it is not the only successful economy in the world and there are lots of opportunities elsewhere.”

His colleague, Hart, said that it’s not all about value, however. “More important than valuation potentially is focusing on companies that have consistent performance and quality,” he said. “That’s what comes through in a down market.”